Information About The Loan Modification Process
At McFarlin LLP, our goal has always been to keep you in your home, avoid foreclosure and accomplish your unique objectives. Modifying your loan has gotten a bad reputation recently as a few unscrupulous attorneys that alter loans, and real estate brokers, were taking money from homeowners and then performing few, if any, services. In response these few bad actors, the State of California made it unlawful for attorneys to accept (upfront) fees for loan modification services.
Unfortunately, this new law chased most reputable lawyers out of the business (they can’t reliably get paid for their work) and it is presently very hard for homeowners to find legal representation in regard to modification. The response from the California Legislature is that homeowners can just negotiate with their lender on their own and without legal representation. While homeowners in every other state may have an attorney represent them when modifying their loan, California has essentially taken that option away.
We understand that you only have a short period of time to overcome the real possibility of losing your property to foreclosure and no one out there will help. Our experienced attorneys and real estate professionals can work to represent you within the unfortunate restrictions placed on us and attempt to keep you in your home, but you must consider allowing us to sue your lender.
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What is Loan Modification?
Prior to hiring our firm, you must have contacted your lender to modify the terms of your loan directly, or through a 3rd party negotiator and been denied. This denial forms the basis of our lawsuit. We can not consider clients who have not attempted to modify a loan independently and been denied. We can not submit a modification for you directly outside of litigation.
After a lawsuit is filed, during the litigation settlement process, modifying the terms of your loan is often confidentially discussed between borrowers/Plaintiffs and lenders attorneys (frequently with the involvement of a court appointed mediator). The following is a discussion of settlements in relation to litigation, NOT a discussion of “stand alone” loan modification legal services.
Most lenders will, at the very least, consider adjusting the term of your loan (as a litigation settlement) where most, or all of the delinquent payments and foreclosure fees are added onto the back end of the loan. Payments often can remain approximately the same. In some cases the interest rate may be reduced permanently.
The objectives of both the lender, and the borrower/Plaintiff in the (litigation settlement) process happen to be the same. The goal is to settle the lawsuit, and design a repayment schedule that ensures the borrower/Plaintiff can afford to pay their mortgage payments while being able to maintain necessary living expenses. This means caring out money in the budget for: car payment(s), food and groceries, utilities, gasoline, insurance, child care, clothing, home maintenance, property taxes, etc.
Who Qualifies For Modifying a Loan (during litigation)?
The need to alter a loan can be caused by many factors, such as:
- The borrower/Plaintiff having less income than anticipated (i.e. reduction in salary or loss of job)
- A family or medical hardship (i.e. illness or death in the family)
- A scheduled change in loan structure that the borrower/Plaintiff wasn’t aware of or didn’t anticipate (payment adjustment)
- A decrease in the value of the property
- And a variety of other factors
Lenders will consider many of these types of issues a “hardship”, and are generally open to altering the repayment terms of the mortgage loan (and on certain loans the principal balance), due to the borrower’s hardship.
To address the back payment issues of borrowers, many lenders have designed “recapitalization” programs where outstanding mortgage payments are added to the principal balance of the loan, and the borrower/Plaintiff goes back to a “current” status on the loan.
Rate Reduction Programs
Nearly all lenders will also consider rate reduction programs which; can substantially reduce a borrower’s monthly payment amount. In order to lower the monthly mortgage payment, lenders frequently offer “rate reductions” which serve to reduce the amount the borrower/Plaintiff pays monthly, by reducing the interest amount.
Especially during the early years of a mortgage reduction schedule, nearly the entire payment is going to pay interest. If the interest is lower, the payment can be reduced accordingly. Today many lenders also offer “temporary rate reduction” programs in which the interest rate is reduced (often well below the market rate) for a period of time to allow the borrower to “get back on track.”
Principal Reduction Programs
While it certainly is possible to reduce principal on a 2nd or 3rd mortgages, first mortgages are generally not eligible for principal reductions, however under unique circumstances it can be possible. These options can be explored in litigation settlement discussions.
On 1st mortgages, to offset the decline in value, lenders often will reduce a borrower’s interest rate to below market levels, but will rarely reduce principal on 1st mortgages. Although there are no official lender programs to reduce principal on 1st mortgages, McFarlin LLP has been successful in reducing principal balances through mortgage alteration and rescission. For 2nd and 3rd mortgages, voluntary principal reduction is often a possibility.
A forbearance program is where the borrower/Plaintiff pays at least 20% of their outstanding mortgage payments, plus foreclosure fees, in addition to their regular monthly mortgage payments. This causes the mortgage payment to actually increase during the term of the forbearance program. The balance of the delinquency will be added to their regular monthly payments over a short period of six to forty-eight months.
Alternatively, a lender may “offer” to allow the borrower/Plaintiff to catch up all back payments at once in a lump sum payment to the lender. In either scenario, forbearance programs do not typically stop foreclosure proceedings, forbearance programs simply “postpone” the foreclosure sale date.
Call Us for Mortgage Litigation and Loan Modification Assistance
Anytime a borrower/Plaintiff is facing foreclosure, or a situation where they are unable to make their scheduled mortgage payments, it is a serious problem. We understand not only the financial impact this type of situation can have on a family, but also the emotional toll it can take. Let us offer you our expertise in loan modifying matters. To get started on your mortgage lawsuit today, and see what programs may be available for you, please contact us today at (888) 728-0044, or email us.
Want to See Sample Results?
Recent loan alteration results were achieved through litigation, not stand alone loan modification services. McFarlin LLP has successfully represented clients, just like you! Although we can never guarantee, warranty or predict a particular result in any legal matter, please review a few of our past successes as a representation of our highly developed skill and expertise. Sample Results
- Foreclosure Overview
- Commercial Loan Modifications
- Deed in Lieu of Foreclosure
- Foreclosure Reinstatement
- Homeowners Bill of Rights Litigation
- Loan Modifications
- Loan Modification FAQs
- Mortgage Litigation
- Short Sales
- Wrongful Foreclosure Litigation